The Mutual Fund industry has grown from a highly regulated environment in 1990s to a very competitive market with more than thirty five Asset Managers, managing assets worth more than USD 150 billion. This phenomenal growth can be attributed to deregulation, entry of new players including foreign asset managers and a liberal incentive plan in the form of entry loads for distributors that encouraged distributors to play market development role.
Post abolishment of the entry loads and other regulatory changes impacting the distributors, the market has witnessed decline in AUMs as well as closure of folios indicating shifting preference of investors. Moreover, the profitability is under stress due to declining management fees and commoditization of schemes offered by the Asset Managers.
With mounting pressures on profitability and growth, the industry is moving towards consolidation. However, achieving scale alone would not turn fortunes of the sector as the funds have to find ways to bring back the investors. Retail investors are expected to emerge as the next growth driver for the industry. This segment offers immense opportunities for mutual funds since less than 5 percent of household savings are channelized in mutual funds, even in urban markets.
The business landscape of the overall asset management sector is evolving continuously through effectively managing investment performance and designing a long-term strategy for targeting and retaining customers. The long term strategy will need to be supplemented with innovative strategies in distribution, product innovation and by creating consumer awareness through sustained investments by the industry.
At Deloitte, we utilize our sectoral expertise to help Asset managers address critical market issues and changing regulatory landscape. We have dedicated professionals providing support in maximizing market opportunities and creating competitive advantage in the areas of growth, profitability, cost management, technology, talent management and regulatory issues. Moreover, we also recognize that there are no “one-size-fits-all” solutions and our clients range from Mutual Funds, Private Equity and Wealth management institutions in India.
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